CIPP survey on the Automatic Enrolment earnings threshold for 2015-16
10 November 2014
The Government has issued a consultation document to consider the earnings threshold for 2015-16 and the CIPP Policy team has issued a survey to collect your views.
Automatic enrolment obliges employers to enrol all workers who satisfy age and earnings criteria into a workplace pension arrangement and pay at least a minimum level of contributions.
The automatic enrolment earnings trigger determines who saves. The qualifying earnings band sets minimum contribution levels for money purchase schemes. These thresholds must be reviewed each year, and revised if appropriate, taking into account the prevailing rates of National Insurance contributions, PAYE personal tax allowance, basic state pension, inflation and any other factors that the Secretary of State considers relevant.
There are three key principles to be considered when setting the automatic enrolment thresholds.
- Will the right people be brought in to pension saving? In particular, at what level will the earnings trigger bring in as many people as possible who will benefit from saving? At what level does the trigger need to be set to avoid the automatic enrolment of those who are unlikely to benefit from saving? And what are the equality implications of the different options?
- What is the appropriate minimum level of saving for people who are automatically enrolled? Everyone who is automatically enrolled should pay contributions on a meaningful portion of their income. To ensure this, there needs to be a gap or de minimis between the lower limit of the qualifying earnings band and the earnings trigger so that no one is automatically enrolled and then only pays contributions of a few pence a month.
- Are the costs and benefits to individuals and employers appropriately balanced? The cost implications of the thresholds remain relevant and the continuing importance of simplicity is also a factor. Alignment as far as possible with recognisable tax and NICs thresholds simplifies system builds, provides compatibility with existing payroll systems and makes automatic enrolment as easy as possible to administer and explain.